Oral Health Group
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Stop the F Word in Your Practice: FRAUD!

September 30, 2022
by Lori Margiotta, Bookkeeper For Dentists and founder of I Work Dental Inc.


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Fraud is on the rise now more than ever in the dental industry. Usually, seven percent of dentists’ monthly revenue is embezzled, and it happens to two-thirds of all dentists, so don’t ever think it can’t happen to you. Dentists are at high risk because they are usually in the operatory all day, generating revenue for the business. This forces them to place the responsibility of overviewing their business in the hands of their office manager or most trusted employee. Unfortunately, it is usually those same hands committing the embezzlement. The embezzler is usually a loyal, long-time employee – “like family.”

Embezzlers know the ins and outs of the practice, and so should you. Knowing what’s happening in your practice automatically acts as a deterrent. Your staff knows you’re watching. It is time to stop being an easy target by relying solely on employees to run the business side of your practice. Knowing your numbers not only helps you build a more profitable practice, but it will prevent and detect fraud.

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If you don’t already, you need to know the top three reasons why employees steal from their employers:

  1. NEED – They’re facing a hardship, or they need to sustain an expensive addiction (drugs, gambling, shopping).
  2. EASE – The company won’t notice anything missing. The company doesn’t have any systems in place to prevent or detect it.
  3. REVENGE – They are overworked and underpaid; they feel under-appreciated, and/or the boss is rude.

What are the warning signs of embezzlement?

  • Employee is living beyond their means. Lavish lifestyle. Purchases expensive items.
  • Complaints from patients about their account.
  • Employee doesn’t take any days off or vacation time.
  • Employee going through financial difficulties. Creditors callings, the employee asks for cash advances. Having wages garnished.
  • Employee gambling or addictions.
  • Employee doesn’t like change. Refuses to work with consultants.
  • Employee is very territorial with their work area. Doesn’t want to train others with their duties.
  • Employee doesn’t follow office systems and protocols (especially with financials). Gets defensive when confronted about any discrepancies.
  • Employee doesn’t reconcile day-end or month-ends accurately. Always provides reasons why they didn’t balance.
  • Employee eager to take over financial duties (receiving mail, bookkeeping, going to the bank, entering payments/credits/write-offs).
  • Employee eager to want to control ordering supplies and inventory.
  • Employee goes to work when the office is closed or comes in early and stays much later than other team members, alone.
  • Employee is very experienced and accepts a job in your practice despite commuting for hours. When you’re that good, it’s easy to find a position close to home.
  • Collection to production is way below 98 percent, and your over-90-days accounts receivable is way over 10 percent for several months continuously.
  • Dental supplies are way over 5 percent for several months.
  • Office supplies are way over 2 percent for several months.
  • Payroll is way over the industry average of 25 percent, and you don’t seem to have downtime or underbilling issues.

The red flags are always there – sometimes many of them. Now that you know them, learn them again, and learn them some more. Get your radar up.

What are the most common types of embezzlement in a dental practice?

Stealing Money

  • Cash: They steal the cash, and may or may not enter in the patient chart (depending if you are cross-referencing). If they enter it in the software, they don’t include it on the bank deposit slip. They may use lapping, steal the cash, and then cover it with another cash payment, and the system starts. They may write off the balance. They may provide the patient with a written receipt, delete the entire treatment, or the treatment is never entered into the software. Payment is entered as a credit instead.
  • Insurance Checks: They are deposited into their personal accounts. Yes, it is possible, even if it is in the doctor’s name. They can still enter it into the patient software. They may write off the balance. They never send statements to the patient or change their address, so they never receive a statement.
  • Credits: Doctor writes up refund cheques for patients, and the employee takes them and cashes them or deposits them into a personal account. Most patients don’t know they have credit on file.
  • Refunds on Terminal: They credit their own credit cards or debit cards
  • Petty Cash: Steals the cash – no monitoring for petty cash, no system in place.

Dental Insurance Fraud

  • Bills insurance for services not provided – could be existing patients, family, and friends, then deletes or writes off entry. Steals insurance cheque. Sent electronically or manual claim. Manual claims are undetectable since there is no entry in the software.
  • Bills other patients’ insurance for family and friends. Steal patients’ identities.

Vendors

  • Makes deals with sales reps for financial incentives.
  • Makes up a fake company (which belongs to them), provide an invoice, and the dentists pay the bill.
  • Opens a real dental supply company, buys supplies, and then sells them to the practice for way more than what was paid.

Dental Supplies

  • Steals for personal use or resale. You can buy anything online from anyone. No budget, no order system in place.

Office Supplies

  • Steals for personal use or resale.

Payroll Fraud

  • Time theft: buddy punching (clocking in for co-workers), adding extra time not worked. Overtime is not being controlled.
  • Adding fictitious names (family members) to payroll.
  • Increasing hourly rate or salary, adding extra benefits or vacation time.
  • Fake patients in the schedule to add extra hours then marked as short cancellation.

Personal Purchases

  • The employee will have a personal account with the same vendors the office uses and makes payments with office funds.
  • Gets reimbursed for personal items.
  • Uses company credit cards for personal items. No one is checking the invoices/statements.

Prescription Theft

  • Calling in prescriptions for family and friends (or themselves)
  • Ordering extra for office to steal for resale on the street

Forged Signatures or Unauthorized Use of Signature Stamps

  • Signing checks for personal items
  • Insurance fraud manual claims

If this list is making you a little queasy, good! Please take this information, study it over and over, and develop an internal system to prevent, deter and detect each of them until your queasiness is gone. Now implement these systems in your practice. Need help on how to come up with these systems? Just ask! Ask Google, ask consultants, ask your practice management software representative, ask me! I don’t care where you get the information. Just get it done and protect your practice. No one is going to do this for you. The harsh truth is that no one will care about your business as much as you do.

When the systems are all in, be sure to continuously do checks (yourself) to ensure they are running efficiently. Then routinely conduct office meetings to discuss anti-fraud policies and potential consequences of embezzlement in the practice. Educate staff on how to detect and anonymously report any possible embezzlement. Did you know that most fraud is detected and flagged by co-workers? The embezzlers are few, so for the rest of your great team, allow them to help protect your practice.

If you have a gut feeling after reading this article that something is not right in your practice and have more questions than answers, don’t wait! Take the necessary steps to protect your business. An owner’s suspicion of theft is usually right.

It’s time for dentists to come together to protect the dental industry and let embezzlers know we are watching. Knowledge is power!


About the Author

Lori Margiotta is the owner of Bookkeeper For Dentists and founder of I Work Dental Inc. She specializes in the organization and analysis of your numbers and how they directly affect the success of your practice. With over 29 years of experience in dental practice management and financial management, Lori prides herself on guiding dentists to build profitable practices. You can reach Lori Margiotta directly at 416.729.4438 and by email at lori@bookkeeperfordentists.com


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